Issue #451
November 1, 2015
The Oasis

Newsletter


The newsletter with chart analysis for stocks and stock indexes

Stock Indexes Analysis/Evaluation


Important Economic Reports Due Out. Catalytic Week Ahead?

DOW Friday closing price - 17666

The DOW had an uneventful week, having made a new 14-week high but then closing only slightly above the previous week's high as well as at the middle of the week's trading range, suggesting that last week was simply a pause week as the traders wait for the ISM Index and Jobs reports due out this week before committing to further movement or direction.

By the same token, it can be said that the bears in the DOW won a small victory on Friday, inasmuch as the index generated a key reversal on the daily chart (made the new 14-week high on that day and then closed below Thursday's low), suggesting the traders are leaning toward the short side of the market for this coming week.

To the upside and on an intra-week basis, the DOW shows minor resistance at the week's high at 17799 and then nothing until the 18000 demilitarized zone is reached. Above that, there is decent and likely pivotal/indicative resistance between 18103 and 18137 that if broken would suggest a new all-time high will be made.

To the downside and on an intra-week basis, the DOW shows minor but short-term indicative support at 17540, which does include the 200-day MA, currently at 17580. In addition, the 17579 level was also decent to strong support between February and June (visited 3 times during that period of time), suggesting that a break of that level would be indicative that this rally has "run out of steam". Below that level, there is minor support at 17225 and then minor to perhaps decent support at the 17000 demilitarized zone.

It is evident that the traders in the DOW will be waiting for fundamental news this week to decide in which direction the index will move for the next 4 weeks, or until a better picture of what the Fed is likely to do in December.

Probabilities slightly favor the bears in the DOW this week.

NASDAQ Friday closing price - 5053

The NASDAQ also had an uneventful week, having made a new 14-week high but then closing only a few points above last week's high and in the middle of the week's trading range, which in turn also suggest the traders will be waiting to see how the economic reports this week come out before deciding on a direction for the next 4 weeks. Nonetheless, the index did close on the lows of the day on Friday and the first course of action for the week is likely to be further downside below Friday's low at 5053.

The big earnings reports for the NASDAQ have now passed, having seen AAPL report slightly better than expected results on Thursday, and that likely means that some backing and filling, as well as retesting of the breakout levels, is likely to be seen unless there is a big fundamental change in the reports scheduled for this week. Nonetheless, it is unlikely that the reports will have the kind of change that would be catalytic.

To the upside and on an intra-week basis, the NASDAQ shows minor to decent resistance between 5092 and 5106. Above that level, there is decent resistance between 5163 and 5175 and major at the all-time high at 5231.

To the downside and on a closing basis (both daily and weekly), the NASDAQ shows minor to decent support at the 5000 level. Below that, and on an intra-week basis, the index will show to decent support between 4902 and 4945 that is strengthened by the 200-day MA, currently at 4925. Below that level there is minor but likely short-term pivotal support at 4836. Further minor support is found at 4771 and then nothing until 4600.

The chart of the NASDAQ has quite a few "magnets" to the downside, starting with the runaway gap that is presently shown between 4926 and 4999, which does include the psychological 5000 level of support. At the very least, the index is likely to test that level before the traders even consider taking the index higher. The next magnet is the 200-day MA, currently at 4925, that has a high probability of being tested before the traders take a stab at the all-time high at 5231, simply because the index stayed below that line for 9 weeks (between August 20th and October 22nd), suggesting that a retest of the line should be seen. The last magnet is the 50-week MA, currently at 4910, which is also a line that has always been highly indicative, but especially during the past 3 years. With the index having traded below the line for 8-weeks in a row, a retest of that line is likely to be seen in order for the traders to verify the validity of the line as an indicator of trend one more time.

Probabilities favor the bears in the NASDAQ this week.

SPX Friday closing price - 2079

The SPX generated the same kind of action as seen in the DOW (including the key reversal on the daily chart), also suggesting the index will start the week under some sell pressure as the traders wait for the scheduled economic reports due out this week to make a short-term direction decision.

Like with all indexes, the SPX has generated 5 green close weeks in a row as well as a showing a 50 on the RSI overbought/oversold indicator (middle of the range), suggesting that a red or green close this coming Friday will be indicative as it will likely show whether the rally will continue (probably on to a new all-time high and toward an overbought condition) or whether a secondary correction will be seen (like the one in 2011 and a retest of the lows on the oscillator).

To the upside and on an intra-week basis, the SPX shows minor resistance at 2102. Above that level, decent resistance is found between 2114 and 2119 and then strong at the double top at 2132/2134.

To the downside and on an intra-week basis, the SPX shows minor support at 2067 and then again minor but likely short-term indicative support, at least on a daily closing basis, at 2058 which does include the 200-day MA, currently at 2061. Below that level, decent but strongly short-term pivotal support is found between 2039 and 2044 that if broken would suggest that a drop down to the 1990-2000 level will be seen. Further and decent support is found at 1970/1972.

The SPX chart is still showing a rare gap between 2055 and 2058 that is likely to be closed before further upside is seen. The index did get down to 2058 this past week but the bears were not able to push the index lower. Nonetheless, that gap will continue to be a magnet and if the economic reports do not generate a new rash of buying interest, the gap is likely to be closed this week. Closure of the gap will "fulfill" the chart and open the door chart-wise for a short-term statement to be made, with 2039 being a support that if broken will cause the index to get into the secondary correction as seen in 2011, while a close thereafter above the 200-day MA at 2061 will give the traders ammunition to generate further upside and even a likely retest of the all-time high at 2031.

Probabilities in the SPX favor the bears this week.


The market is likely to pivot this week on the economic reports that may (or may not) give the Fed the kind of information they need to decide whether to raise interest rates in December or wait until next year. With the odds right now at about 50-50 of a raise in December, the probabilities are high these reports (ISM Index and Jobs) will be a deciding factor. As such, the outlook for the week is almost a flip of a coin.

The charts seem to favor further sideways-to-slightly-down-bias action during the week (at least until Friday's Jobs report) as recent breakouts above MA's are likely to be tested during the week. By the same token, the ISM Index on Monday "could be" a big monkey-wrench since it is expected to come out at 49 and that number already suggests the economy is shrinking rather than growing. A lower number than expected would be a 2-edged sword as it would likely prevent the Fed from raising interest rates in December but would also suggest the economy is heading into a recession and it is difficult to imagine the market would rally under that scenario.

Stock Analysis/Evaluation
CHART Outlooks

This coming week is likely to pivot on how the ISM Index and Jobs report come out, meaning that there is no "likely" direction that can be counted on at this time. The probabilities seem to slightly favor the bears but with possibly catalytic economic reports due out, it is difficult to take on positions on either side of the coin with confidence.

As such, there are only 2 mentions this week and they are both carry-overs from last week and the week before that. Both of these mentions have their own chart picture that is likely to overcome whatever the overall market does.

Nonetheless, with the first economic report due out tomorrow morning at 10:00am (ISM Index), if the traders lean in one direction or the other after the report, I will have added mentions on the message board.

SALES

CVX Friday Closing Price - 90.88

CVX gave a strong sell signal in November of last year when the stock broke below the 200-week MA, currently at 112.30, for the first time since August 2010. It is evident that there were fundamental negatives with the company then, since the break to the downside occurred at a time when the indexes were still in a strong uptrend from which further upside of consequence occurred. The downtrend began in earnest in April, after the stock tested the 200-week MA successfully, as the stock got into a 15-weeks-in-a-row string of red closes that included breaking a previously confirmed support at $100. The end result was a drop down to 69.58, a low that was seen on August 24th.

CVX has seen a 24% rebound off of the August lows and did close near the highs of the week on Friday, suggesting further upside above last week's high at 91.98 is likely to be seen this week. Nonetheless, this rally has likely been mostly short-covering after the 49% drop in price during the last 15 months, as well as some affinity to the rally seen in the indexes over the past 8 weeks.

To the upside, CVX shows very minor resistance at 93.81, minor at 95.79 and decent at the $100 level (based on a weekly close). On a daily closing basis, decent resistance is found at the 200-day MA, currently at 97.30. Nonetheless, it should be mentioned that the stock shows decent to perhaps strong intra-week resistance from July-December 2007 between 95.00 and 95.30.

To the downside and on an intra-week basis, CVX shows minor support at 86.74 (last week's low) and minor again at 82.29. Below that, minor to decent support is found at the $80 demilitarized zone and then again between 74.30 and 75.10. Strong support is found at the August low of 69.58.

Though the action seen in CVX over the past 4 years does suggest the bulls are likely to attempt to get back to the important and pivotal $100 level, the level of weakness seen during periods of strength in the indexes, as well as the fact that the stock hit a brick wall between July and December 2007 at the $95 demilitarized zone, does suggest that the bulls will fail in their attempt to reach either the 200-day MA, or the $100 level.

CVX has generated 2 minor red weekly closes the last 2 weeks, suggesting that the selling interest is being seen as the bulls try to take the stock higher. Nonetheless, the stock closed near the highs of the week and further upside above last week's high at 91.98 is expected to be seen, suggesting that there is a possibility that the stock will get up this week to (or near) the desired entry point.

It should be remembered that the major low in CVX at 69.53 does not show a spike low retest of that level, suggesting that when the stock finds resistance that a fast and likely strong move down will occur.

Sales of CVX between 94.70 and 95.30 and using a mental stop loss at 95.89 or a daily close stop loss at 97.87 and having an 80.00 objective will offer at least a 4-1 risk/reward ratio.

My rating on the trade is a 3.25 (on a scale of 1-5 with 5 being the highest). The rating would be higher if there was a clear resistance level that could be used as a reliable stop loss.

PURCHASES

WMT Friday Closing Price - 57.24

WMT received a disappointing earnings report 2 week ago that caused the stock which caused the stock to drop 12% in value over a period of 3 days, as well has kept the stock moving lower as not buying interest has yet been seen. Nonetheless, the company is one of the stalwarts of the economy and with the drop in price seen the last 3 weeks, it has reached a level of support between $56 and $57 that dates all the way back to January 2009, having acted as decent to perhaps strong resistance between 2009 and 2011 and then minor to perhaps decent support in 2012. With the strong oversold condition, a mostly straight down drop of 46% over the past 9 months, and reaching a level of support that was important for 3 years, the chances of the stock holding up at this level are decent to perhaps strong.

WMT previously traded in this area ($57-$63) between November 2011 and May 2012, which was also the time frame when the indexes were recovering from the strong correction seen in May-Oct 2011, suggesting that the stock has a decent likelihood or repeating the action seen at that time.

WMT made a new 3-year low this past week in spite of the indexes rallying, suggesting that further downside is likely to be seen this week even if the market continues higher. The stock closed on the lows of the week, suggesting further downside below last week's low at 57.16 is expected to be seen this week. Nonetheless, with the stock having reached an important level of support, it is likely to generate some buying interest even if the indexes head lower.

To the upside and on an intra-week basis, WMT will show minor resistance at the $60 demilitarized zone (59.70-60.30), some minor to perhaps decent intra-week resistance at 62.57 as well as minor to decent daily close resistance at 63.34 that was the level of support that got broken when the earnings report came out.

To the downside, WMT shows minor to decent intra-week support at 57.18, minor at 56.32 and very minor at 55.68. Nonetheless, on a weekly closing basis, there is minor to decent weekly close support at 56.89 (seen the third week of November 2011) that is further strengthened by a previous high weekly close at 56.70 that was seen the third week of January 2011.

The probabilities seem to favor WMT trading between the $57 and $63 level for the next 3 months while the traders await what the overall market will do in 2016.

Purchases of WMT between 56.70 and 57.30 and using at 55.58 stop loss and having a 63.00 objective will offer a 3-1 risk/reward ratio.

My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).

Updates
Monthly & Yearly Portfolio Results
Closed Trades, Open Positions and Stop Loss Changes

Status of account for 2007: Profit of $9,758 per 100 shares after losses and commissions were subtracted.
Status of account for 2008: Profit of $14,704 per 100 shares after losses and commissions were subtracted.
Status of account for 2009: Profit of $7,523 per 100 shares after losses and commissions were subtracted.
Status of account for 2010: Profit of $24,045 per 100 shares after losses and commissions were subtracted.
Status of account for 2011: Profit of $3,616 per 100 shares after losses and commissions were subtracted.
Status of account for 2012: Profit of $3,399 per 100 shares after losses and commissions were subtracted.
Status of account for 2013: Profit of $15,886 per 100 shares after losses and commissions were subtracted.
Status of account for 2014: Profit of $21221 per 100 shares after losses and commissions were subtracted.

Status of account for 2015, as of 9/1

Loss of $256 using 100 shares per mention (after commissions & losses)

Closed out profitable trades for October per 100 shares per mention (after commission)

CAT (long) $262
QRVO (long) $1901

Closed positions with increase in equity above last months close minus commissions.

KNDI (long) $277
XOM (long) $1700

Total Profit for October, per 100 shares and after commissions $4140

Closed out losing trades for October per 100 shares of each mention (including commission)

KNDI (short) 50
AMT (short) $250

Closed positions with decrease in equity below last months close plus commissions.

NONE

Total Loss for October, per 100 shares, including commissions $300

Open positions in profit per 100 shares per mention as of 10/30

HAL (short) $275
FSLR (long) $215
KNDI (short) $38

Open positions with increase in equity above last months close.

ENG (long) $3
AREX (long) $147
FCEL (long) $48
FSLR (long) $5728

Total $6454

Open positions in loss per 100 shares per mention as of 10/30

WMT (long) $48
DXD (long) $73
QRVO (long) $4

Open positions with decrease in equity below last months close.

AREX (long) $6

Total $131

Status of trades for month of October per 100 shares on each mention after losses and commission subtractions.

Profit of $10,163

Status of account/portfolio for 2015, as of 10/30

Profit of $10,419 using 100 shares traded per mention.



Updates on Held Stocks

AREX generated another red close, the 3rd in a row, but ended up closing near the high of the week, suggesting that the recent string of red weekly closes might change next week. If the stock does go above last week's high at 2.53, last week's low at 2.05 will become the second successful retest of the all-time low at 1.65, which in turn would increase the odds of the stock continuing higher. Any rally above the 3.02 level would be an additional buy signal and would suggest the $5 level would become a target to be reached in the next couple of months. Probabilities slightly favor the bulls.

ARNA generated a positive reversal day, having made a new 3-year low and then closing in the green and on the highs of the day, suggesting further upside will be seen on Monday above today's high at 1.89. More importantly, a double bottom was built on the daily closing chart at 1.81 and that does give the reversal a bit more strength. Unfortunately the bulls were unable to generate anything positive on the weekly closing chart, not even a close in the upper half of the week's trading range, meaning that the reversal is still not all that indicative. Simply stated, more will need to be done next week, including not allowing new lows to be made, or this reversal will be negated before it even "warms up the heart a bit". Minor intra-week support is found at 1.51 and minor resistance is found at 2.45.

DXD got down to the all-time intra-week low at 19.74 with a drop down to 19.76 this past week. Just like with the DOW, the index closed exactly in the middle of the week's trading range, leaving the door open for either side to claim victory, likely depending on how the important economic reports come out. Resistance is found at the high of the week at 20.34 that if broken would suggest that a rally up to the 200-day MA, currently at 21.35 would likely be seen. A new low below 19.70 would be a reason to liquidate the positions. Probabilities are split evenly.

ENG continued to trade totally sideways between .88 and 1.10 (something it has done for the past 2 months) but this week did get up to 1.09 and closed slightly in the upper half of the week's trading range, suggesting that the bulls now have the opportunity to make a statement. The stock reports earnings on Thursday morning before the opening and it is unlikely that the report will be much of a surprise. By the same token, a no-surprise report will likely favor the bulls since the bears have been unable to push the stock down during the past 9 weeks in spite of the stock being in a downtrend. Resistance found at 1.10 that if broken would suggest a rally up to the 1.24-1.30 level. Support is found at .92 and at .88 that if broken would be an additional sell signal. Probabilities slightly favor the bulls.

FCEL generated a positive reversal week, having gone below last week's low but then closing in the green. The reversal came off of news of a contract to build a new clean energy plant in Southern California and does give the stock an additional reason to rally. The bears failed to close the gap down at .73 cents and if the stock goes above last week's high at .89 this week, the probabilities of that gap being closed will be reduced. In fact, with the stock closing on the highs of the week, there is a real possibility that a second gap could occur on Monday, which in turn would generate a breakaway/runaway gap formation that would give the bulls additional ammunition to generate a new rally as well as the beginning of at least a decent short-covering rally. Resistance is found at .95 and at 1.00 and if a second gap is generated on Monday and the resistance levels broken at some point during the week, a rally up to the 200-day MA, currently at 1.07, will likely occur. A confirmed close above the 200-day MA would be a "strong" sign that the downtrend is over. Support is found at .81, at .77 and at .68. Probabilities favor the bulls this week.

FSLR reported better than expected earnings and gapped up on Friday, creating what could be considered a major 5-month island gap formation (gap down between 54.90 and 53.67 and gap up between 53.67 and 54.65) that if confirmed would suggest an uptrend of consequence is about to begin. The stock tested the 54.90 island gap low on Friday after the report came out with the drop down to 54.65 but the bears were unable to take the stock any lower and the stock then proceeded to close in the upper half of the week's trading range, suggesting further upside above last week's high at 58.43 will be seen this week. Minor to decent Intra-week resistance is found at 59.00 and then minor at 59.79. A break above the top of the $60 demilitarized zone (above 60.30) would suggest the stock will rally at least up to the next intra-week resistance at 65.99 but would also suggest the island formation has been created and confirmed. Closure of the gap down at 52.15 (Thursday's high) would be a negative. Probabilities favor the bulls.

HAL generated an uneventful week, having traded the same trading range as the previous week without any sign of direction for this week. The stock closed slightly in the upper half of the week's trading range but not in a way that would suggest the bulls have the edge for this coming week, meaning that like with the indexes the traders will likely wait to see how the economic reports come out this week before deciding on direction. Resistance is found at the 40.00 demilitarized zone and support at the 37.00 demilitarized zone. Probabilities slightly favor the bears, inasmuch as the stock remains in a longer-term downtrend.

KNDI generated a second green close above the 200-week MA, currently at 8.35, which does increase the probabilities that not only a low to the downtrend has been found at 5.05 but that a sideways trend has begun. Nonetheless, the bulls were unable to break above the 200-day MA, currently at 9.85, having rallied up to 9.95 twice this past week but unable to close above the line. The stock closed on Friday in the upper half of the week's trading range, as well as near Friday's daily high, suggesting the first course of action for the week will be a new attempt to break the line above. If that occurs, there is additional weekly close resistance at 10.46, which includes the 50-week MA, currently at 10.35, as well as intra-week resistance 10.95. With the resistance being mostly MA's and psychological ($10 level), the stop loss at 10.35 should be mental as it is possible that the traders will attempt to take the stock higher intra-week to hit stop losses but then fail to accomplish a breakout on a daily and weekly closing basis. Minor but likely pivotal support is found at 8.43 that if broken would suggest a drop down to 6.90 will occur. Probabilities favor the bulls this week but only for intra-week strength. Company reports earnings on Monday November 9th.

LVS continues to show a desire to go higher but so far the $50 level has held the stock down, with the traders probably waiting to see what happens in the index market. The stock closed on the highs of the week and further upside above last week's high at 49.78 is likely to be seen this week. Intra-week resistance is found at 50.50 that if broken would suggest a rally up to the 200-day MA, currently at 52.30, or even up to the 50-week MA, currently at 53.50 will occur. As such, the stop loss at 50.60 should remain in place even though it is not considered a pivotal area for the long-term downtrend. By the same token, the $50 level is considered an important and pivotal longer term resistance area on a weekly closing basis, meaning that if stopped out, consideration should be given to re-shorting the stock between $52 and $53. Pivotal support is found at 45.95 that if broken would suggest the $40 level will be visited again.

QRVO generated a strong 15% drop in price this past week after negative reports in the semi-conductor industry came out. The stock closed on the lows of the week and further downside below last week's lows at 43.49 is likely to be seen. Nonetheless, the stock generated a pause day on Friday, as well as a green daily close, likely meaning that buying interest is being seen as the stock approaches its all-time low at 42.24 (all-time meaning 10-months), which in turn suggests that no follow through to the downside of consequence will be seen this week. As it is, no retest of the low had been seen yet, suggesting this drop could be the "required" retest of the low before the traders get more aggressive on the buy side. Minor but likely short-term pivotal resistance is found at 47.07. Probabilities favor the stock heading down to the 42.70-43.30 level at the beginning of the week and then turning around.

WMT made a new 42-month low and closed on the lows of the week, suggesting further downside below last week's low at 57.16 will be seen this week. The stock shows intra-week support at 57.18 and again at 56.23, which is considered very minor. Nonetheless, on an weekly closing basis, support is minor to decent at 56.70, which was the weekly close resistance for a period of 33-months, between January 2009 and October 2011, and that will be difficult to break at this time due to the strongly oversold condition as well as the 47% drop in price seen over the past 9 months. The stop loss at 56.65 should be mental as there is a decent chance that some additional selling will be seen this week but unlikely that much further downside, below 56.70 will be seen on a weekly closing basis. A hard stop loss can be placed at 55.58 as a break of that minor intra-week support would suggest the $50-$51 level would be seen.


1) FCEL - Averaged long at 2.227 (4 mentions). No stop loss at present. Stock closed on Friday at .88.

2) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 1.04.

3) FSLR - Purchased at 54.91. Averaged long at 58.21 (5 mentions). No stop loss at present. Stock closed on Friday at 57.07.

4) AREX - Averaged long at 6.013 (3 mentions). No stop loss at present. Stock closed on Friday at 2.36.

5) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 1.89.

6) WMT - Purchased at 57.72. Stop loss at 55.58. Stock closed on Friday at 57.24.

7) QRVO - Purchased at 43.89. Stop loss at 42.14. Stock closed on Friday at 43.93.

9) KNDI - Shorted at 9.90. Averaged short at 9.62. No stop loss at present. Stock closed on Friday at 9.41. .

10) HAL - Averaged short at 39.755. Stop loss at 41.38. Stock closed on Friday at 38.38.

11) AMT - Covered shorts at 101.67. Loss on the trade of $236 per 100 shares minus commissions.

12) LVS - Shorted at 48.66. Stop loss is at 50.60. Stock closed on Friday at 49.51.

13) DXD - Purchased at 20.78. No stop loss at present. Stock closed on Friday at 20.05.


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Disclaimer

The opinions and commentaries by Mr. De Vito are not a recommendation to buy or sell, but rather a charting guideline, based on his own knowledge and experience, regarding the stocks he is following or that are brought to him by others. Mr. De Vito does not presently offer a track record of his trading experiences. No inference of success and/or failure should be assumed. The information enclosed above, regarding his background, length of trading, and experience, is correct but is not meant to suggest, state, or infer any future success in trading, based on his opinions.

The information herewith included should only be used by investors who are aware of the risk inherent in securities trading. Mr. De Vito accepts no liability whatsoever for any loss arising from any use of the information and/or comments he supplies.




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